Deficits in social functioning are a hallmark of schizophrenia, the major cause of long-term disability in this disorder, and remain refractory to currently available antipsychotic medications. Social dysfunction in schizophrenia has been strongly linked to impaired social cognition, a set of cognitive abilities that include emotion recognition, attributional style and theory of mind. Oxytocin (OT) has been shown by decades of animal research to have numerous pro-social effects. OT also exerts antipsychotic-like efficacy in animal models of schizophrenia. In recent human studies, intranasal administration of OT increased interpersonal trust and eye contact as well as improved emotion recognition and theory of mind in normal subjects. Based on these prior findings, we hypothesized that OT treatment may improve social deficits and psychotic symptoms in schizophrenia. In a 2-wk randomized, double blind, placebo-controlled pilot study, we found that twice daily intranasal administration of OT (N=8), but not placebo (N=6), significantly 1) decreased PANSS total scores as well as scores on suspiciousness and other social function-relevant PANSS items, 2) decreased subject ratings on the Paranoia Scale and 3) improved accurate identification of second order false beliefs in the Br|ne test of theory of mind, among patients with schizophrenia. We now propose a 12-wk treatment trial to determine over this more clinically relevant period whether OT treatment will 1) further improve social cognition, 2) improve social functioning and 3) further decrease other psychotic symptoms. The proposed research is a unique translational collaboration between a basic behavior neuroscientist with expertise in OT (Dr. Cort Pedersen) and an applied research scientist with expertise in social cognition and psychosocial treatment in schizophrenia (Dr. David Penn). This project may demonstrate that OT has therapeutic effects that are superior to current antipsychotic medications (especially improvement in social cognition and social functioning) and open a new front in the investigation of the pathophysiology of schizophrenia.